In order to beat the market, we have to know which stocks to buy. To know which stocks to buy, we have to follow three simple guidelines. We have to be willing to go against the market. We have to be willing to be patient. And we have to be able to resist greed and fear.
Today, the stock market is trading near all-time highs. There is a sense of hope priced into many stocks. Yet, there are many other stocks that are pricing in more despair than hope. As investors, our goal is always to beat the market. We want to use our knowledge to give us that edge to successfully grow our wealth.
Be willing to go against the market in finding stocks to buy
Suncor Energy Inc. (TSX:SU)(NYSE:SU) is a Canadian integrated oil and gas company based in Alberta. It is not a sector that brings excitement among anyone these days. In fact, it elicits indifference at best and scorn at worse.
But should we turned off by this? Or should we pull our sleeves up and dig deeper? I say we should dig deeper. We might just like what we see. We might just find the Suncor is a stock to buy.
The first thing I like about Suncor stock is the fact that it’s trading at depressed valuations. Many investors want nothing to do with it, as the long-term outlook for Suncor is a little dicey.
After all, we are in the beginning phases of an energy transition away from fossil fuels. Also, oil is a notoriously volatile commodity. It has been through the ringer this year. Investors are nervous.
But all of this has resulted in a really attractive opportunity. The opportunity that Suncor Energy stock is trading at severely depressed valuations — and it’s yielding a generous 3.7%. Finally, Suncor is not the doomed company that the market is making it out to be. It is actually a top stock to buy today.
Because Suncor is, in fact, a highly diversified and integrated oil giant. It has a highly resilient business model and balance sheet. Suncor also has the wherewithal to invest for a sustainable future. Its stated greenhouse gas emissions goal is to “harness technology and innovation to reduce our emission intensity by 30% by 2030.”
Be patient
Being willing to be patient is just another way of saying to maintain a long-term outlook. If you do have a long-term outlook, you can ride out the storms. Also, you give companies a chance to fulfill their long-term strategy. We want to invest in companies that make decisions for the long-run. Those are the best stocks to buy. We should also have that mindset when we are managing our own portfolios.
For example, Goodfood Market Corp. (TSX:FOOD) stock had five years of dismal returns. The company always had a great solution for busy families, but it took time for things to take off; it eventually did so in the aftermath of the pandemic. Goodfood stock is up 180% so far in 2020.
Resist greed and fear
Resisting greed and fear might take a little more work. But if you can get a handle on those two emotions, you will save yourself from many money-losing mistakes.
I first looked at Ballard Power Systems Inc. (TSX:BLDP)(NASDAQ:BLDP) a few years ago. I read the updates, listened to company calls, and became excited about Ballard Power stock. But I remembered this fuel cell designer and manufacturer from the early 2000’s.
Ballard Power stock had risen to $172 per share in 2000, only to fall 89% to $19 two years later. I was fearful, but resisted the fear, and it’s paid off handsomely so far. Ballard Power stock is another stock to buy to beat the market.
The bottom line
Follow these three tips and buy these three stocks today. If you do, your odds of beating the market will rise dramatically.
